Shawane L. Lee is an energy and utilities partner at Snell & Wilmer.
The Federal Trade Commission Green Guides, officially titled "Guides for the Use of Environmental Marketing Claims," were first introduced in 1992 to provide guidance for companies making environmental claims in their advertising. These guides aim to help businesses avoid making misleading or deceptive statements about the environmental benefits of their products or services. They provide specific guidelines on how businesses can make claims related to various environmental aspects, including renewable energy, and more. Revised in 1996, 1998 and 2012, the Green Guides have evolved to reflect changes in market practices and consumer awareness about environmental issues.
The Green Guides are not legally binding regulations; however, they serve as a critical interpretative tool for the FTC's enforcement of Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices. The guides also influence state laws and enforcement actions, as many states have incorporated the Green Guides into their consumer protection laws.
Several states have explicitly incorporated the FTC Green Guides into their laws, making compliance with the guides a defense against allegations of deceptive environmental marketing. For instance, California's Business and Professions Code Section 17580.5 states that it is unlawful for a person to make any false, deceptive, or misleading environmental marketing claim, including any claim contained in the FTC Green Guides. This incorporation means that if a company can demonstrate compliance with the Green Guides, it has a legal defense against claims of deceptive practices in California.
Section 260.15: Renewable energy claims
One of the critical areas of focus within the Green Guides is the treatment of renewable energy claims, specifically addressed in Section 260.15. This section aims to prevent deceptive practices in marketing renewable energy by setting clear guidelines for how such claims should be presented to consumers.
Section 260.15 of the Green Guides states that it is deceptive to misrepresent, directly or by implication, that a product or service is made with or uses renewable energy if any part of the manufacturing or operation process relies on fossil fuels, unless the marketer has matched the non-renewable energy use with renewable energy certificates (RECs). The section emphasizes that unqualified claims, such as stating that a product is made with renewable energy without specifying the percentage or the type of renewable energy used, are misleading unless all or virtually all of the significant manufacturing processes are powered by renewable energy or covered by RECs.
For example, if a company claims that its product is made using renewable energy, it must either ensure that all or nearly all of the energy used in the manufacturing process is from renewable sources or provide clear information about the percentage of renewable energy used and the type of renewable source, such as solar, wind or biomethane. If fossil fuels are used at any stage, this must be disclosed unless the company has purchased RECs to offset this non-renewable energy use.
Request for comments on the Green Guides
In December 2022, the FTC issued requests for comments regarding potential updates to the Green Guides, and several stakeholders, including state attorneys general from 15 states and the District of Columbia, provided comments specifically addressing Section 260.15, which focuses on renewable energy claims. The state attorneys general made several recommendations, including the requirement that renewable energy claims be backed by actual environmental benefits. Additionally, they urged the FTC to eliminate the renewable energy certificate exception for marketers using non-renewable energy and recommend that companies should be required to actually procure and use renewable energy if they are going to make such claims. The state attorneys general pointed out, there is no guarantee that the purchase of RECs result in the actual use of the underlying renewable energy. By eliminating the renewable energy certificate exception, marketers must have actually bought and used renewable energy when they market products backed by renewable energy claims.
What to expect when the FTC Green Guides are updated
We have been anticipating the announcement of the updated Green Guides for some time. The update was initially expected by the end of 2023, then early 2024. Now, as 2024 approaches its close, it seems unlikely that the guides will be updated this year. Additionally, there has been no new information on this issue. As we await the FTC’s decision on the updates to the Green Guides, companies should prepare. The 2012 update to the Green Guides led to a surge in enforcement actions, a pattern likely to repeat once the new guidelines are in place. Public utilities and energy companies, in particular, should brace for increased scrutiny of their environmental claims.
There are two primary areas of risk for companies concerning the Green Guides. The first is direct risk, where a company’s own representations may be scrutinized. The second is secondary risk, where a company may face liability by amplifying renewable energy claims through its marketing, partnerships or sponsorships with third parties. For example, if a utility promotes a solar provider's claim that its solar panels are made with 100% renewable energy and have zero environmental impact, but it later emerges that the manufacturing process has a significant carbon footprint, the utility could face liability for endorsing misleading claims.
The updated Green Guides will likely place a greater emphasis on the verifiability of claims, meaning companies must adopt best practices to ensure compliance.
Best practices for compliance
To help avoid enforcement actions and to ensure compliance with the Green Guides and state consumer protection laws, companies should consider adopting several best practices when making environmental marketing claims:
1. Specificity and objectivity:
Environmental claims should be specific and based on reliable evidence. Companies should use clear and straightforward language, avoiding vague or broad statements that could be misleading. For instance, a statement like "natural gas is clean" is overly broad and could be challenged as deceptive without further qualification.
2. Substantiation with evidence:
Claims should be backed by robust evidence, such as test results, research studies or third-party certifications. For example, if a company claims that its product is made using renewable energy, it should provide data showing the percentage of energy that comes from renewable sources and specify the type of renewable energy used. Companies should also consider external verification or certification by a third-party to strengthen the credibility of their claims.
3. Consistency across platforms:
It is essential to ensure that all marketing materials, advertisements, and public statements are consistent. Any discrepancies between what is stated in one medium (e.g., a website) and another (e.g., printed ads) could lead to claims of deceptive practices.
4. Monitoring and updating claims:
Companies should regularly review their environmental claims to ensure they remain accurate and compliant with current guidelines. This includes regular reviews of marketing materials, coordination across departments and ensuring that data used to support claims is accurate and up-to-date. If a company identifies a potential issue with a claim, it should take immediate corrective action, which may include revising or retracting the claim or reporting the issue to relevant regulatory bodies.
5. Engaging with third-party data and competitors:
Companies should be aware of industry trends, competitor claims and publicly available data that could impact their marketing practices. Understanding the broader market context and how it relates to the company’s own claims can help prevent potential conflicts and ensure that claims are both competitive and compliant.
The FTC Green Guides are a critical tool for ensuring that environmental marketing claims are truthful and not misleading. As we move toward an era of stricter enforcement and heightened awareness, companies may want to follow best practices to help avoid potential legal risks and maintain consumer trust.
